Will more tax fix New Zealand’s post-Covid economy?

As we emerge from lockdown and confront how to repair the damage done to our economy when our borders might be closed for an extended period, you’d like to think that those who can influence change are burning the midnight oil developing smart strategies to get us back on our feet. But is that actually happening?

Labour’s solution seems to be to continue to pursue discredited ideology while randomly throwing billions of borrowed dollars at things in the hope that some of it might stick. National have opted to throw out 12 months of carefully developed policy in favour of a change of leader and faux outrage. New Zealand First are pretty much irrelevant given the poll numbers. Which leaves the Greens. And what innovative solutions are they proposing at a time when many parts of the economy is on its knees and we need our entrepreneurs and risk-takers to step up more than ever? You guessed it— more tax, with an increase in welfare payments.

Its proposal is to fix the economy by reforming the tax system and doling out cash to potential Green Party voters. This would include paying a minimum wage of $325 per week to everyone not in full employment (including students), increased payments to single parents, a universal benefit for each child, and plans to turn ACC into an agency for universal sick leave. The Greens estimate that this would all cost $6.6bn in year one and around $12bn per year from 2023.

And how would this be paid for? By a wealth tax of course!

Those of you with assets of more than $1m would pay a levy of 1 per cent per year on your equity (which means an additional tax bill of at least $10,000 per year, every year). In addition to this, there would also be two new tax brackets.

This sort of money-for-free policy might play well to the young and ”woke”, but it’s the same tired old nonsense that damages growth and innovation and punishes the people who already pay most of the tax.

Consider this. We live in a nation where almost 50 per cent of all personal tax is already paid by 11 per cent of taxpayers (those earning over $90,000) and hitting these people even harder is regressive and fiscally insane.

The Greens claim that this policy would only hit 6 per cent of taxpayers. Apart from the fact that justifying tax by claiming that only a few will be hurt is morally outrageous, it’s also untrue. Median house values will push many Kiwis into this new tax-grab bracket, and those that aren’t in it now will move there over time, as house prices and equity increase.

Neither increasing tax, nor increasing benefits, constitute a reform of the tax system. True reform will come about as a result of a fundamental review of the philosophy behind taxation and an entirely different framework by which to fund our nation’s needs. That’s a far cry from the populist tinkering being proposed here.

Ignore the name and look at what this tax actually proposes to do. It’s a tax on wealth derived from specified assets. There’s another name for that — it’s called a capital gains tax. Someone may wish to point this inconvenient fact out to the Government, which promised never to introduce such a thing during the term of leadership of their current leader.

Incidentally, there is a legitimate debate to be had around the idea of a universal wage as we confront the implications of Artificial Intelligence and a society which may have significantly more free time in the future. But that transition will take at least 25 years and will require structural social change and careful planning.

Using it as an excuse for a tax grab in 2020 is morally reprehensible.

“Neither increasing tax, nor increasing benefits, constitute a reform of the tax system.”